No let up in consumer credit growth as the Bank of England eyes risky lending


Lending to consumers is approaching £200bn (Source: Getty)

The amount of credit offered to British consumers grew by the most in six months in May, continuing the trend of a big expansion in consumer growth which has caught the eye of the Bank of England.

Total consumer loans outstanding now add up to just short of £200bn, with another £1.7bn added in the month of May alone, the Bank of England reports.

That represented 10.3 per cent annual growth, far above the expansion in income.

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The figures come in the week the Bank’s financial stability chiefs, the financial policy committee (FPC), warned consumer lending was one of multiple “pockets of risk” in an otherwise stable UK economy.

Some economists are concerned British consumers are borrowing unsustainable amounts in an effort to sustain their standards of living in the face of rising inflation.

The growth in credit card debt, which reached £68.2bn in May, has attracted the scrutiny of the FPC, with deputy governor for financial stability Jon Cunliffe warning competition in the sector may be too intense. Some firms have offered interest-free teaser periods of up to four years in a bid to attract customers.

The Bank is also concerned about other aspects of consumer lending, with risky car finance deals attracting particular scrutiny.

Meanwhile mortgage approvals during the month stayed relatively steady, with 65,202 during May, up from 65,051 in the previous month. However, the rate of house purchases was below the six-month average.

Read more: Consumer-led growth is unsustainable says Sir Charlie Bean